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Office of Consumer Credit Commissioner

Office of Consumer Credit Commissioner. Motor Vehicle Installment Sales. disclaimer. This presentation is for general and informational purposes only The speaker's comments are not a formal interpretation of statutes or regulations

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Office of Consumer Credit Commissioner

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  1. Office of Consumer Credit Commissioner Motor Vehicle Installment Sales

  2. disclaimer • This presentation is for general and informational purposes only • The speaker's comments are not a formal interpretation of statutes or regulations • If anyone has unanswered questions, we invite you to contact the agency directly • Our web site: • www.occc.texas.gov • Licensing portal: • https://alecs.occc.texas.gov/ • Our address: • 2601 N Lamar Blvd Austin, TX 78705 • Our phone number: • 512-936-7600 • Consumer assistance: • 800-538-1579 8/6/2015 | Page 2 of 65

  3. how to contact the OCCC • Our web site: • www.occc.texas.gov • Licensing portal: • https://alecs.occc.texas.gov/ • Our address: • 2601 N Lamar Blvd Austin, TX 78705 • Our phone number: • 512-936-7600 • Consumer assistance: • 800-538-1579 As of February 1, 2015, all new Motor Vehicle Sales Finance License applications will only be accepted through ALECS 8/6/2015 | Page 3 of 65

  4. contract required • A retail installment contract (RIC) is required (T.F.C.§348.101) • May be one or more prepared documents that when combined evidence a retail installment transaction • Must use a “plain language” retail installment contract. • a list of such RICs may be found at: http://www.occc.state.tx.us/pages/industry/IndexMVSF.html • An RIC must be written, dated, and completed prior to presenting to a buyer for signature. • Failure to use or complete an RIC in a RIT violates: • Sections of Chapter 348, Texas Finance Code • Sections of Chapter 84, Texas Administrative Code • Sections of the Business & Commerce Code 8/6/2015 | Page 4 of 65

  5. buyer’s order not an RIC • A buyer’s order or purchase agreement: • Is not a retail installment contract (RIC) (T.F.C.§348.001(6)) • Is not required in a retail installment transaction (RIT) • Does not contain required disclosures • Does not confer the remedies provided in an RIC • no right to place lien • no right to repossess • Is a required record if created (T.A.C. §84.708) 8/6/2015 | Page 5 of 65

  6. examinations • The purpose of an examination is to ensure compliance • Exams are routine and by notification • You will be contacted prior to arrival • Only preparation required is to make sure records are made available on arrival including: • all financed sale folders: open, paid and repo • access to all customer account ledgers • your financed sales list • a list of open accounts (for buy-here-pay-here) • a list of all repos • A written report will be presented upon completion 8/6/2015 | Page 6 of 65

  7. required records Files and Records Required of all Retail Installment Sellers/holders • General business and accounting records concerning retail installment sales transactions must be maintained. . . . The business and accounting records must include receipts, documents, or other records for each disbursement made by the licensee at the retail buyer's direction or request, on his behalf, or for his benefit, that is charged to the retail buyer. • Records required for each retail installment sales transaction. Each licensee must maintain records with respect to the licensee's compliance with Texas Finance Code, Chapter 348 for each motor vehicle retail installment sales contract made, acquired, serviced, or held under Chapter 348 and make those records available for examination. 8/6/2015 | Page 7 of 65

  8. books and records • Required records differ by type of seller or holder • Sellers who assign contracts – 7 T.A.C §84.707 • mostly franchise and some independent sellers • Sellers who hold & collect their contracts - 7 T.A.C §84.708 • buy-here-pay-here sellers • Subsequent Holders - 7 T.A.C §84.709 • finance companies • Books and records must be made available for examination • Retained for the latter of: • four (4) years from date of contract, or • two (2) years from date of final entry 8/6/2015 | Page 8 of 65

  9. lists of transactions The following are required lists of transactions to be maintained and produced during an examination: • A list of all financed transactions • A list of all active open transactions • A list of all repossessions 8/6/2015 | Page 9 of 65

  10. books and records 7 T.A.C §84.708(e)(2) Records to be maintained making up a customer file: • Completed retail installment sales contract • Buyer's order, if prepared • Credit application • Other agreements or disclosures signed by the retail buyer applicable to the retail installment sales transaction • Receipt for downpayment (receipt(s) or copies of checks/MO’s) • Proof of payoff of any trade-in vehicle (copy of payoff check) • A copy of the Texas Disclosure of Equity in Trade-In Motor Vehicle • Notice to Co-signer 8/6/2015 | Page 10 of 65

  11. books and records 7 T.A.C §84.708(e)(2) (cont.) Records to be maintained making up a customer file (cont.) • Original certificate of title (or copy if original pledged or otherwise secured) • Title Application Receipt (Form VTR-500-RTS) or (Form 31-RTS) • Application for Texas Certificate of Title (Form 130-U) • Power of Attorney to Transfer a Motor Vehicle • Copy of the completed County of Title Issuance form (Form VTR-136) • Equivalent documents for out of state sales • State Motor Vehicle Inspection receipt (if charged on sale) 8/6/2015 | Page 11 of 65

  12. books and records 7 T.A.C §84.708(e)(2) (cont.) Records to be maintained making up a customer file (cont.) • Copies of all product certificates including (but not limited to): • Debt Cancellation Agreements • GAP Insurance • Credit Life Insurance • Accident & Health Insurance • Service Contracts • Maintenance Agreements • Identity Theft Protection • Auto Club • Copies of any claims documentation for any coverage (such as the above) included or added to an RIT 8/6/2015 | Page 12 of 65

  13. buyer’s account record 7 T.A.C §84.708(e)(3) Account record for each transaction including (but not limited to): • Account #, Date of contract, Name and Address of buyer • Itemized transaction record identifying each: • Date of transaction (date of transaction and date of entry if different) • Payment (itemizing principle, finance charge, etc) • Late charge • NSF charge • Credits and refunds • Any other charge or credit • Corrective entries 8/6/2015 | Page 13 of 65

  14. choosing & completing an RIC what must, what may, and what must not be included

  15. select the right RIC for your business Choose the Appropriate Finance Charge Method • Add-On Method • Substantially equal monthly payments only • 1st payment must be due no later than one month and 15 days after date of contract • Scheduled Installment Earnings Method* • Finance charge for each period is fixed regardless of when payment is made • True Daily Earnings Method* • Finance charge earned on unpaid balance daily until paid • *Payments may be scheduled monthly, semi monthly, bi-weekly or weekly • Make sure your contract and your software use the same method! 8/6/2015 | Page 15 of 65

  16. select the right RIC for your business Choose the Correct RIC for the Sales Tax Method Used • Sales Tax Advanced • Transfer and sales tax paid within 21 working days of sale • Sales Tax Deferred • Sales tax is paid with each customer payment • Requires seller-finance sales tax permit from Comptroller • Must transfer title within 45 calendar days of sale • Affects finance charge calculation (make sure your RIC and software match) • Make sure your contract and your software use the same method! 8/6/2015 | Page 16 of 65

  17. completion of RIC: itemized charges Charges other than the sales price in a contract • All charges must be disclosed in the RIC • All charges must be authorized • All charges must be supported by written documentation • All documentation to support charges are required records • All documentation to support charges in an RIC is subject to review during an examination or investigation • Charges must be identified as retained by the seller or paid to someone else 8/6/2015 | Page 17 of 65

  18. completion of RIC: itemization Itemized charges: charges not in the cash price • Authorized costs incurred by the seller on behalf of the buyer may be included in the itemized charges of an RIC. • Itemized charges may include actual out-of-pocket costs for: • Sales tax, license, title and registration • Vehicle inventory tax • State inspection fee • Premiums for service or maintenance agreements • Credit life, accident & health, and GAP premiums Documentation is required for all itemized charges: receipts, certificates of coverage, VIT statements, etc. (7 T.A.C. §§ 84.707 & 708) 8/6/2015 | Page 18 of 65

  19. completion of RIC: itemization • Examples of unauthorized itemized charges include: • Cost for certificates of coverage for products not authorized, approved or registered with appropriate authorities • Make-ready fee • Processing fee • Prep fee • Administrative fee • Transportation fee • Shipping • Financing fee All of the above are subject to refund by the seller if found to be included in an RIC 8/6/2015 | Page 19 of 65

  20. documentaryfee • A documentary fee: • Is authorized to be charged in an RIC “for services rendered for or on behalf of the retail buyer in handling and processing documents relating to the motor vehicle sale.” (T.F.C. §348.006) • Must be charged uniformly in both cash and credit transactions • May not exceed a reasonable amount. • No documentary fee greater than $50 may be charged without first filing notice with the OCCC (With a successful filing, you will receive, and should keep, an email from docfee@occc.texas.gov) • To file notice, a seller must be licensed with the OCCC. • Any filing greater than $50 may be reviewed but any filing greater than $150 will be reviewed for reasonableness. 8/6/2015 | Page 20 of 65

  21. state motor vehicle inspection The overall cost of state inspections has not changed. But how the fees are collected has. • The inspection station now only collects the amount they keep • Your required record is the station receipt • The portion previously remitted to the state is now collected directly by the state with vehicle registrations • Your required record is the certificate of title application receipt (form VTR-500-RTS, aka “white slip”) Remember, you may only include the cost of a state inspection if you paid for the parts of a state inspection and then only that cost evidenced by the required records in the buyer’s transaction file 8/6/2015 | Page 21 of 65

  22. completion of RIC: ancillary products • Examples of ancillary products includes but are not limited to: • Credit life, accident and health insurance • Service contracts and maintenance agreements • GAP insurance • Debt cancellation agreement (DCA) (Also referred to but as but is not gap) • Auto Club • Identity theft All of the above are subject to regulatory oversight and must be licensed, registered or otherwise approved. Premium rates must be reasonable and may be by rule or filing. 8/6/2015 | Page 22 of 65

  23. completion of RIC: ancillary products • Additional examples of ancillary products may include but are not limited to: • Maintenance plans or agreements • Paint and fabric protection plans • Paintless dent plans • Glass, wheel and tire protection/replacement plans All of the above are allowed but must be a third party product or service and the rate or charge must be reasonable. These products and services must be related to the sale. 8/6/2015 | Page 23 of 65

  24. additional transaction requirement Texas Disclosure of Equity in Trade-in Motor Vehicle7 T.A.C., §84.204(H) If a trade-in is tendered in a RIT: • Disclosure must be completed and provided to the buyer(s) before the RIC is signed, and; • A Copy of the signed disclosure must be maintained in the buyer’s transaction file. 8/6/2015 | Page 24 of 65

  25. authorized charges for enforcing an RIC • Authorized charges in connection with enforcement of an RIC • Contractual late fees • Fees for returned items ($30.00 max) • Reasonable Out-of-Pocket Repossession Expenses • actual costs paid to unrelated third parties in connection with the repossession. E.g.: • repo fee • Storage fees • Auction fees • Reasonable repairs/prep for sale • Reasonable Attorney’s Fees • Court Costs These costs may be added to the balance owed 7/30/2015 8/6/2015 | Page 25 of 65 Page 25 of 62

  26. ALECS your on-line portal for licensing and renewals

  27. let ALECS help you Application, Licensing, Examination, and Compliance System • Submit a License or Registration Application • View Your License, Registration, and Application Status • Renew Licenses • Perform Various Self-Service Functions • Pay Assessments and Fees Online All new motor vehicle sales finance license applications will only be accepted via ALECS. 8/6/2015 | Page 27 of 65

  28. ALECS - user account Log into ALECS by visitinghttps://alecs.occc.texas.gov You may also visit the OCCC home page and select the ALECS icon. A user account must be created and linked to your business before processing any online transactions 8/6/2015 | Page 28 of 65

  29. ALECS - dashboard Provides snapshot view of: • Your requests to the OCCC • Pending actions for you to complete • General information on the business associated or linked to the user account 8/6/2015 | Page 29 of 65

  30. ALECS - dashboard Provides snapshot view of: • Your most recent business transactions • The most recent activity or actions taken affecting your business • Additional fees that may be assessed or requested outside of the regular application and renewal process 8/6/2015 | Page 30 of 65

  31. ALECS - additional actions Manage Profile • Change User Account Password • Change User Account Email Address • Change User Account Security Questions • Submit Application • Submit New Registration Application • Submit New License Application 8/6/2015 | Page 31 of 65

  32. ALECS – additional actions • Manage My Business • Print Registrations or Licenses • Renew Registrations or Licenses* • Activate Licenses • Surrender Registrations or Licenses • Change Addresses or Modify Locations • Update Location Contact Information • Update Key Contact Info • Manage Pawn Employee Licenses • Change Registered Offices to Licensed Locations • *With the exception of Crafted Precious Metals Dealers Notifications & History Identify recent notifications and communications generated by ALECS and view a snapshot history associated with a license or registration. 8/6/2015 | Page 32 of 65

  33. this concludes our presentation thank you

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